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  • In the past few weeks, the surge in Covid cases in the CEE region has led to governments announcing new rounds of restrictions to limit the downside risks.
  • The vaccination rate in some CEE countries is still very low, creating the risk of a fourth wave of infection this winter.
  • As CEE governments have been constantly criticized over the poor management of the Coronavirus pandemic (last winter / spring), leaders will be more 'risk averse' this time to avoid losing popularity.
  • We recently saw that Latvia recently announced a month-long lockdown with PM Kariņš mentioning this week that the health system was in 'danger'.
  • Poland Health Minister Adam Niedzielski said at a press conference yesterday that the government may take 'drastic' steps in case the situation continues to deteriorate.
  • In Czech Republic, Health Minister Adam Vojtech told reporters yesterday that face masks would be mandatory indoors as of October 25, including in workplaces, and restaurants and bars will start to check guests as of November 1.
  • Romania, where only 30% of the population is fully vaccinated, has recorded the highest per capital Covid death rates; President Klaus Iohannis called the situation a "national drama of terrible proportions".
  • Hence, new restrictions from governments to limit the downside risks could lead to a significant downward revision in growth expectations and therefore weigh local currencies (versus 'safe havens' such as the US Dollar).

Source: Bloomberg/MNI